"The voting procedures for business conducted at a special meeting are not particularly clear as there is not a  specific article with the federal credit union bylaws that addresses the unique issues of a special meeting," Van Vleet wrote in her eight-paragraph email.

Tormala forwarded Van Vleet's email about the absentee ballot issue to Ruth Siragusa, a consumer access analyst for the NCUA's office of consumer protection.

"In the event the credit union has to call a special meeting, the credit union is planning to use absentee ballots," Tormala wrote in an email to Siragusa. "I was under the impression the vote for removing board members at a special meeting must be done in person by the members that attend the meeting."

On August 8, Siragusa confirmed in her email response to Tormala that "the voting can only be done by the persons attending the meeting … as shown in Article XVI" Section 3 of the federal credit union bylaws."

"The reason that the absentee ballot does not work here is that the members are not present to hear both parties speak regarding the petition, specifically, the person who they are trying to remove from office," Siragusa explained. "The voting is done after the person(s) who are named in the petition have been heard. With the absentee ballot, the person(s) name in the petition have not been allowed to their right to be heard."

Despite the advice, SHCFCU mailed and counted the absentee ballots at the Sept. 7 special meeting and the board members kept their seats.

 "When I read those emails, I thought this was the game, set, match," Knebel said. "She inquired if she could do it. She got the answer no and she did it anyway."

In response to the revelation of the emails, the St Helens, Ore.-based credit union board of directors said in a statement Monday that following Van Vleet's initial email query, it shared with the NCUA a "full legal analysis" to justify its use of absentee ballots, adding that the regulator "never intervened or directed the credit union to act otherwise."

Knebel filed federal and state lawsuits last year that alleged bylaw violations during a recall election of five board directors. According to court documents, the credit union counted mailed recall ballots, which contradicts federal credit union bylaws that require recall elections only count votes cast in person during a special meeting.

"The board's decision to utilize mailed ballots was made after considering a detailed legal analysis, which allowed broader participation from the entire membership – rather than a small fraction of members able to be present at a special meeting," the SHCFCU board said in its statement.

The recall election failed to oust the five of the seven board members Lea Chitwood, Michael Hafeman, Richard Louie, Marty Borrevik and David Graham. Currently, however, only Graham and Louie remain on the board.

Knebel said he dropped the lawsuit on April 21 because he no longer has the financial resources.

Before he dropped his suit, however, Knebel said SHCFCU attempted to reach an out-of-court settlement with him that would have required him and his wife to terminate their membership and close their personal and business accounts.

Van Vleet disputed that account in an email to CU Times, saying Knebel requested a settlement deal.

Knebel said the proposed settlement also would have allowed the credit union to issue a press release that would have emphasized the importance of active participation by members and would have recognized Knebel's contribution to that participation, according to a document obtained by CU Times.

"I was tired of fighting this," he said. "I spent almost $20,000 of my own money and was getting nowhere. When it got down to where they wanted to (take) depositions … they wanted to depose me … they wanted to depose all of my friends and family, it seemed like, so it was getting expensive. And then it would have gone to trial. There is no way they were going to win the trial, but there was also no way I was going to spend $40,000."

Van Vleet said the credit union "made an offer to settle on terms that would have been acceptable."

Van Vleet told CU Times the SHCFCU's legal expenses amounted to less than 1.5% of its annualized professional services expenses in 2013 and for the first quarter of 2014. The credit union spent a total of $910,584 in 2013 and $290,221 for professional services expenses in the first quarter of 2014, according to 5300 Call Reports.

"Legal expenses are a typical cost of doing business and are included in our annual budgeting process," she said. 

Knebel was part of a group of members who started a recall petition in June 2012 to remove five of the seven board directors after members became upset with the dismissal of former SHCFCU CEO Jeff Schwarz. They also had concerns and questions about a proposed merger with the $165 million Wauna Federal Credit Union in Clatskanie, Ore. That merger was called off.

Read more about St. Helens and Knebel in the June 18 print edition of CU Times.